Are Small Companies Better?

Results of the November Faxpoll? Most of you want to hold onto the benefits of being small. But some said it's not the size that counts; it's the attitude.

Would you deliberately limit the growth of your company to retain what you perceive as the advantages of being small?

Yes 59% No 41%

Well, we're not exactly surprised. Look at whom we asked. Sixty-seven percent of the respondents have fewer than 20 employees. That was kind of like asking vegetarians whether they'd like a salad or prime rib. But even if the outcome was a foregone conclusion, the reasons you like being small -- and are quite content to stay that way, thank you -- are rather illuminating. And your perception of how large companies operate is not too flattering.

In general, would you say that small companies -- say, those with fewer than 500 employees -- are in a better position to do business in today's economy

Yes 75% No 15% No difference 10%

What's so great about being small? In a word, flexibility. Small companies "can adapt to change instantly, hourly if necessary." Most of you place a lot of stock in maintaining corporate flexibility, and "the bigger the business, the less flexibility it has." You need to react to the capricious desires of the customer, bring products to market faster, respond to market opportunities as they develop, and avoid disasters. Why are small companies more flexible? There's "less clay to reshape when change is needed"; internal communication is easier on a smaller scale; "everyone is closer to the center of the business"; and small companies are used to getting more done with fewer resources.

The minority think that the disadvantages to being small outweigh the benefits. Chief among their complaints is the odious amount of regulation to which most small businesses are subject and their limited resources to overcome its stultifying effects. Large companies "don't suffer from their mistakes as much as we do," said one. Still others say there's no real difference between small and large companies. "It's not so much size as resiliency and responsiveness" that matter, and that "depends on management philosophy, not company size." In fact, "some of the best big companies are structured like a conglomeration of little companies."

Note: Multiple responses account for total percentages above 100%

Which of the following do you think small companies are better at?

Customer service 85% Innovation 67

Employing innovative management 52 techniques

Bootstrapping 43

Getting and keeping good employees 35

Creating jobs 34

Selling 29

Partnering 20

Marketing 19

Most respondents think small companies are inherently better than large ones at customer service and innovation, especially in management. You think large companies have the edge in selling and marketing. As your company has grown, you feel you've gotten worse at keeping that personal touch on employee and customer relations (33%), being cost efficient (15%), providing quality service (9%), and maintaining growth (8%). Sounds as if some of you are becoming what you fear most. "As we've grown, we seem to have acquired the traits we detest in those big companies."

In order to keep the advantages of being small, most of you say you would deliberately limit your growth. "I don't want to grow too large and come in one day and not know who my employees are."

What relationship(s) do you have with big companies?

Buy from them 69% Sell to them 66

Compete with them 65

Partner with them 25

The greatest benefit in dealing with big companies? You learn from them. Whether you emulate them is another thing. "I learn from their mistakes, but I also watch to see what they do well." If you sell to large companies, the biggest advantage is cash flow. Big companies have deep pockets. Having large companies as clients also gives you marketing cachet -- an "appearance of legitimacy" to other potential customers and vendors.

But doing business with large companies is also a source of frustration. They are slow to respond and reluctant to change. Competing with large companies can also be frustrating. "Large companies have greater purchasing power than I do. How do you compete with that?" But some respondents said that perceived differences between large and small competing companies are just that: perceived. Small businesses can compete successfully against larger businesses, you said. "The trouble is convincing bankers that we can." n